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On Our Radar

Dell's Buyout Teeters As It Rules Out Voting Change

Michael Dell and Silver Lake's $24.4 billion bid to take over Dell Inc suffered a blow on Wednesday after the company's special committee rejected their request to change the voting rules in exchange for a sweeter bid.

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Dell shares fell 3 percent to $12.48, their lowest level since news of the takeover broke on Jan. 14, highlighting uncertainty among shareholders about the deal's prospects.

The special committee, set up by Dell's board to assess whether shareholders were getting the best deal, refused to change the voting rules but said it would be willing to move the vote's record date forward.

Earlier, a person familiar with the matter said Michael Dell and Silver Lake expect their deal to collapse unless there is a change in how shareholder votes are counted.

At present, the buyout must be approved by a majority of all Dell shares, excluding those held by Michael Dell. The buyout group last week raised its offer by 10 cents per share on the condition that the deal goes through if approved by a majority of the shares that are actually voted.

This followed two adjournments of shareholder meetings, on July 18 and July 24, after it became apparent the buyout group did not have enough votes supporting the deal.

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The consortium estimated that in the latest tally, about 27 percent of Dell's shares had not been voted and were therefore counted as "no" votes under the current voting standard.

Alex Mandl, the special committee's chairman, wrote in a letter to the buyout group, "The committee is not prepared to accept your (voting rules) proposal. We are, however, willing to establish a new record date for a vote on a $13.75 per share transaction under the existing voting standard."

The record date determines which Dell shareholders are entitled to vote on the deal. A person familiar with the matter said the special committee would be willing to push the record date to Aug. 10 for the vote to be held on Sept. 10.

A shareholder meeting to vote under the current system is scheduled for Friday.

The source familiar with the matter said the buyout consortium believes that changing the record date is not good enough. Unless the voting standard changes, this is the end of the road for the deal, the source said.

Activist investor Carl Icahn, who has amassed an 8.7 percent stake in Dell and is leading a charge with Southeastern Asset Management Inc against the buyout with an offer of his own, said in a letter on Monday that shareholders had already spoken and that a change in the voting standard would "make a mockery of what little is left of corporate democracy at Dell."